The first months of 2024 saw a year-on-year easing in many commodity prices, as soft global demand weighed on energy prices and prospects of adequate crop supply capped agrifood price growth. However, geopolitical shocks sparked turbulence in the oil market and drove up gold prices, while rising supply concerns fuelled a rally in copper. Global commodity prices are set to trend lower this year, yet geopolitical risks, adverse weather, and a stronger global economy could add upward pressure.
Natural gas prices trend down, as oil markets face high volatility
The energy market outlook this year remains subject to multiple upside and downside risks. Geopolitical tensions and supply uncertainties may add upward pressure, while softer global demand in the higher-for-longer interest rate environment is expected to limit energy demand and cap price increases.
After reaching a 6-month high in April 2024, crude oil prices eased significantly, pressured by concerns about tepid global economic growth and increasing prospects of delayed monetary easing in major economies, which would further dampen consumer and industrial demand. Surging electric vehicle (EV) sales, particularly in Asia Pacific, Western Europe, and North America, will also reduce oil consumption.
The global number of EV registrations is forecast to grow by 17.5% in 2024
Source: Euromonitor International
While OPEC+ is expected to extend oil output cuts in June, any upside surprises in OPEC+ output and robust production outlook in non-OPEC countries could help ease global oil prices.
Natural gas prices declined in Q1 2024, with the European benchmark falling to nearly half its level a year ago as sluggish industrial activity and favourable weather weighed on demand. Throughout 2024, abundant production and inventories, along with the growing adoption of renewables and efficiency gains, are expected to keep natural gas prices in check. However, potential increase in consumption in the power and industrial sectors in response to lower prices, as well as lower US exports and higher demand from China and other Asian economies pose an upward risk.
The geopolitical situation in the Middle East remains a key factor to watch, as intensifying tensions or potential escalation could affect production and exports of oil and gas in the region and bring volatility to the energy market.
Robust supply of grains to support lower food commodity prices
Prices of major crops continued to slide in Q1 2024, with corn, wheat, and soybeans seeing the biggest year-on-year declines. Strong production from the US, Argentina, and China is projected to push global corn output to a record in the 2023-2024 season, significantly easing prices. Soybean prices are also forecast to decline in 2024 and 2025 due to higher plantings in the US and Brazil. Easing fertiliser costs have also provided some support for farmers, helping to increase agrifood output. According to the World Bank, the fertiliser affordability index has been approaching its pre-pandemic average.
Poor weather, partly related to El Niño, has pushed cocoa and Robusta coffee prices to record highs in 2024. Cocoa prices rose by 146% year-on-year from January to April due to production shortfalls in Côte d’Ivoire and Ghana caused by scarce rainfall and disease outbreaks. Robusta coffee prices reached a 4-decade high by April 2024, driven by supply concerns. With El Niño’s impact fading, supply is expected to improve next year, potentially easing prices for both commodities. However, extreme weather linked to La Niña could add volatility to food supply and prices in affected areas.
Metal prices rebound in Q2 2024, but outlook remains moderate
Prices of key industrial metals started to rebound in Q2 2024. A stable US economy and signs of recovery in China’s economy are supporting demand for metals. Reduced operational capacity of Chinese smelters also contributed to the price recovery, especially in the aluminium markets.
The further price trajectory of industrial metals remains unclear given slower anticipated interest rate cuts in the largest economies and weaker manufacturing sector growth
Source: Euromonitor International
The weakness of China’s residential housing sector is also expected to extend into 2025, limiting global demand for iron and steel.
Gold prices have surged in Q2 2024, driven by the rising geopolitical uncertainty and purchases by central banks. According to the World Gold Council, globally, central banks added 229 tonnes of gold to their reserves throughout 2023. Demand growth is forecast to extend into 2024 with countries like China, Poland, and India further increasing their gold reserves. However, the gold price trend for 2024 remains uncertain as lower inflationary pressures could ease investors’ demand for gold.
Learn more about developments in global commodity markets in our report, Global Trends in Commodities Market, and read our recent article, Global Economic Outlook: Q2 2024, to assess how the world’s economic trends could affect commodity market dynamics.